Who here would say they compete with the Big3?

[Piper]

Just curious… I know a lot of indies and small regionals don’t really compete with the Big 3 for customers, but I’m guessing many do.

I’d like to hear from some of those that do go head to head with PH or PJ, and what kinds of strategies you have for doing so.

 

[goodmank]

In our small town there are 2 shops, us and PH. So I would say that I definitely compete with them for customers.

Strategies that I use now
Match on price for deals and delivery charge. (exception is I do $10 any large pizza ONLY on Tuesday not everyday)

Dig in deep with the schools, sport teams, churchs, and community. This has been the most important for me and is the top reason that I am still in business.

I know you did not ask but here are my top failed strategies

Free delivery - How many times have you done something and wished that you could turn back time? I lost thousands of dollars by offering free delivery. I mistakenly thought that I might get more customers since PH charges for delivery…WRONG!!! and ever since I started charging there has not been one single complaint about the charge.

Pricing deals lower than PH - Another HUGE mistake. Do not do it. There are people that will be loyal to you and there are people that LOVE PH (or any of the big 3). My hope was to get the people looking for the lowest price option. BIG mistake.

I can probably come up with more but these were the top things that came to mind

 

[Piper]

Thanks goodmank… exactly the kind of stuff I’m looking for. Would love hear from more of you!

Here’s a little background for why I’m curious about this…

My trade area is four quadrants. The two south and the northeast quadrants have median home values approaching $400,000. These areas are my bread and butter. We’re expensive and market as a high quality place. I’ve scientifically examined my marketing returns with demographic information… I do significantly better attracting customers when the home value is $300,000 and above.

My northwest quadrant has a median home value of $218,000. I have marketed to that area the same as the other three, but I have almost no penetration. In the three “high end” quadrants I have an average of 893 active addresses. The “low end” quadrant has 309. I know that PJ and PH dominate in that market.

I want to go after those customers. I can engage in price discrimination where I go head to head with PJ and PH in that market and still do my regular thing in the other market. My database marketing is advanced enough to continue the discriminatory marketing after they’re in my system.

I’m also looking for a fight… I know that sounds strange, but when I first opened 8 years ago I was driven by competing. We had a sign in our kitchen that had the logos of our three indie competitors in crosshairs that said “Kill anything that moves”. I was fired up every day to dominate my market. I wanted to bury them.

I took the sign down 3 years ago because all of three of those competitors closed. Every independent or regional in my trade zone has closed or changed owners since I opened.

I think going after that northwest quadrant and doing battle with PJ and PH will light a long-gone fire within me, but I just don’t have the experience yet.

Do I have a better pizza than them? I don’t know… a lot of having a “high quality, gourmet” pizza is in the marketing. The things I do know is that my pizza is cheaper to make than them, I provide significantly better service, I have significantly higher fixed costs, and I have spare capacity during most times of the week (including prep labor capacity).

 

[paul7979]

I consider the big three my competition. The Domino’s here is pretty highly regarded by their corporate and I think they would agree that I am their primary competition. The PJ’s and Pizza Hut here do average numbers for their company but nothing exceptional considering we have one of the countries largest universities here.

We compete with price as well as product and service. I run higher food costs than they do despite buying better products cheaper than they can. We don’t skimp in our toppings and cheese. We run higher labor as we staff our stores for good service rather than running a skeleton crew. Our average delivery time is in the 22 to 24 minute range while they routinely quote 35 to 45 minutes and commonly fail to meet that.

Our occupational costs are low as both stores pay less than $1800/ month in rent. Advertising costs are relatively low as we have no national advertising fees with our franchise. On top of that, they probably spend twice what I do in local advertising.

That said, in my town, the high end houses are just as likely to order from the big 3 as they are to order the high end pizza. The lower priced neighborhoods dominate pizza sales. My unscientific opinion is that the houses here that are considered “starter” homes order pizza three times as often as the higher end homes. There are families that I can count on to order 2 times a week or more every week. These customers are almost always in the lower prices houses. I think you’ll do well to market yourself differently to these neighborhoods.

 

[Piper]

Thanks, Paul… awesome information.

paul7979:

My unscientific opinion is that the houses here that are considered “starter” homes order pizza three times as often as the higher end homes. There are families that I can count on to order 2 times a week or more every week. These customers are almost always in the lower prices houses. I think you’ll do well to market yourself differently to these neighborhoods.

This is definitely a problem for us. Our average frequency on our current customers is .61 times per month (and we work for it with database marketing.) Granted, the average ticket is about $30.00. I would be happy to obtain some customers that order twice per week at a $15.00 average ticket in my “lower end” market.

PJ’s is currently running a $12.00 large with up to 5-toppings here. I wouldn’t do a five topping, but I would match that price on a 3-topping. The menu cost of that would be $18.09 at my my store. My cost with the average toppings would be $3.56 so just a touch under 30% food cost. Call it 32% with waste. Marginal labor would be about 11%, credit card discount about 2%. All in cost is 45%… 55% contribution margin. Seems like a no-brainer for incremental sales.

If I could grab 50 extra orders per week at $15 I’d be dropping over $20,000 extra to the bottom line in a year… and all for a market I already deliver to but don’t pay much attention to. I can see the south end of the zip code from my front windows.

I am concerned for my drivers that are used to averaging $4.20 per drop. I under-staff my driver schedule so they make more money. I may need to send a cook out on 1 or 2 deliveries per night, but I’ve always thought that was better than adding a driver and splitting all of the deliveries again. We’ve never taken delivery super seriously; we’re over 50% dine-in. Our normal quote time is 45 minutes to an hour. We have areas up in the hills that will really take that long, but if I’m properly staffed this new target market is very close. I could reasonably run 30 minutes to them if we aren’t slammed.

I assume I need to take delivery and delivery times more seriously if I’m going after this market? I would almost certainly need to add a driver to each night, and I assume the average tip will not be $4.20 on this $12 pizza market. I’ll probably have to bump my driver’s pay rates to keep them at the same hourly. There’s no way I would make this a carry-out special thing. Actually, the last thing I need on Friday or Saturday nights is more people in line.

Any advice on advertising in a market like this? I’m considering a Red Plum or Advo drop to start things up. I will probably fire some self-printed black and white postcards to test things out first, but it seems like PH and PJ rely on married mail.

Darn, the more I look at the numbers the more I think these lower markets could make me a lot of money. I have pockets of carrier routes throughout my delivery zone… even in the higher end markets… that I have very little penetration in. We’ve built a great restaurant here, but I have to wonder if there’s a lot of money in just being a “pizza joint” for some markets…

Would love to hear any comments from anybody on this strategy. What am I missing in my thought process?

 

[paul7979]

Piper:

Would love to hear any comments from anybody on this strategy. What am I missing in my thought process?

One thing to keep in mind is as you calculate the additional contribution to the bottom line is that it is inevitable that some of your current customers will move from paying the higher price to paying the new lower price. No matter how targeted your coupons are, some from outside that area will get their hands on them either from other friends or family.

I don’t think tips are based much on income level of the customer other than as a generality, the very well off and the very poor seem to tip poorly. Those in the middle tend to tip based more upon the ticket average. My ticket average is about $16 and our average tip is right around $3.00. I don’t think you will need to adjust your drivers pay because more deliveries means more income hourly for them. If the driver makes a $3 tip at a time that the would have been waiting for a run, they should be happy about it. Plus you make it seem that this area is closer to your store than many other parts of your delivery area so the drivers ought to be happy to earn a slightly smaller tip for driving a shorter distance.

I wouldn’t worry about Domino’s 5 topping special. It may be popular there because that’s what they push, but most people will be more than satisfied with a two or three topping pizza.

I’ll close with my take on delivery times. I’ve had more than a few arguments/discussions with people from this board about the importance of delivery times for building delivery sales. We are competing not only with other pizza shops that might take 45+ minutes to deliver, but we are competing with take out restaurants, sit down restaurants, grocery stores ect. There’s not much convenient about having to wait 45+ minutes when you have a couple of hungry children to feed. It would be quicker for most to cook something out of the pantry or stop for Chinese on the way home. I have spoken to quite a few people who are trying to build delivery sales and not having much success but they have the feeling that their customers understand that it takes them longer to produce their higher quality food. Most are adamant that faster delivery times will not help build delivery sales. My take is that faster delivery times certainly won’t hurt, and I feel they are every bit as important as any other reason that both of my stores do the volume that they do. A recent conversation with a Jimmy Johns manager of a store that does over $20K weekly only strengthened my beliefs. Since an ownership change of their store, delivery times went from over 20 minutes to well under 15 minutes. Sales have almost doubled and nearly all local marketing has been discontinued. Never underestimate the value making your business the most convenient food option a family has.